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September 6, 2023

The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District

August 2023

Federal Reserve Districts


New York

San Francisco
Kansas City


Alaska and Hawaii
are part of the
San Francisco District.


St. Louis



The System serves commonwealths and territories as follows: the New York Bank serves the
Commonwealth of Puerto Rico and the U.S. Virgin Islands; the San Francisco Bank serves
American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.

This report was prepared at the Federal Reserve Bank of Kansas City based on information
collected on or before August 28, 2023. This document summarizes comments received from
contacts outside the Federal Reserve System and is not a commentary on the views of Federal
Reserve officials.

National Summary


The Beige Book is a Federal Reserve System publication about current
economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety
of mostly qualitative information, gathered directly from each District’s
sources. Reports are published eight times per year.


What is the purpose of the Beige Book?

First District

New York
Second District



Third District



Fourth District



Fifth District



Sixth District



Seventh District

St. Louis


Eighth District



Ninth District

Kansas City


Tenth District



Eleventh District

San Francisco
Twelfth District

What is the Beige Book?


The Beige Book is intended to characterize the change in economic
conditions since the last report. Outreach for the Beige Book is one of
many ways the Federal Reserve System engages with businesses and
other organizations about economic developments in their communities. Because this information is collected from a wide range of contacts through a variety of formal and informal methods, the Beige Book
can complement other forms of regional information gathering. The
Beige Book is not a commentary on the views of Federal Reserve

How is the information collected?
Each Federal Reserve Bank gathers information on current economic
conditions in its District through reports from Bank and Branch directors, plus interviews and online questionnaires completed by businesses, community organizations, economists, market experts, and other
sources. Contacts are not selected at random; rather, Banks strive to
curate a diverse set of sources that can provide accurate and objective
information about a broad range of economic activities. The Beige
Book serves as a regular summary of this information for the public.

How is the information used?
The information from contacts supplements the data and analysis used
by Federal Reserve economists and staff to assess economic conditions in the Federal Reserve Districts. The qualitative nature of the
Beige Book creates an opportunity to characterize dynamics and identify emerging trends in the economy that may not be readily apparent in
the available economic data. This information enables comparison of
economic conditions in different parts of the country, which can be
helpful for assessing the outlook for the national economy.

The Beige Book does not have the type of information I’m looking
for. What other information is available?
The Federal Reserve System conducts a wide array of recurring surveys of businesses, households, and community organizations. A list of
statistical releases compiled by the Federal Reserve Board is available
here, links to each of the Federal Reserve Banks are available here,
and a summary of the System’s community outreach is available here.
In addition, Fed Listens events have been held around the country to
hear about how monetary policy affects peoples’ daily lives and livelihoods. The System also relies on a variety of advisory councils—
whose members are drawn from a wide array of businesses, non-profit
organizations, and community groups—to hear diverse perspectives on
the economy in carrying out its responsibilities.

National Summary
The Beige Book ■ August 2023

Overall Economic Activity
Contacts from most Districts indicated economic growth was modest during July and August. Consumer spending on
tourism was stronger than expected, surging during what most contacts considered the last stage of pent-up demand
for leisure travel from the pandemic era. But other retail spending continued to slow, especially on non-essential items.
Some Districts highlighted reports suggesting consumers may have exhausted their savings and are relying more on
borrowing to support spending. New auto sales did expand in many Districts, but contacts noted this had more to do
with better availability of inventory rather than increased consumer demand. Manufacturing contacts in several Districts
also noted that supply chain delays improved, and that they were better able to meet existing orders. New orders were
stable or declined in most Districts, and backlogs shortened as demand for manufactured goods waned. One sector
where supply did not become more available was single-family housing. Nearly all Districts reported the inventory of
homes for sale remained constrained. Accordingly, new construction activity picked up for single-family housing. But
multiple Districts noted that construction of affordable housing units was increasingly challenged by higher financing
costs and rising insurance premiums. Bankers from different Districts had mixed experiences with growth in loan demand. Most indicated that consumer loan balances rose, and some Districts reported higher delinquencies on consumer credit lines. Agriculture conditions were somewhat mixed, but reports of drought and higher input costs were widespread. Energy activity was mostly unchanged during the final months of the summer.

Labor Markets
Job growth was subdued across the nation. Though hiring slowed, most Districts indicated imbalances persisted in the
labor market as the availability of skilled workers and the number of applicants remained constrained. Worker retention
improved in several Districts, but only in certain sectors such as manufacturing and transportation. Many contacts
suggested “the second half of the year will be different” when describing wage growth. Growth in labor cost pressures
was elevated in most Districts, often exceeding expectations during the first half of the year. But nearly all Districts
indicated businesses renewed their previously unfulfilled expectations that wage growth will slow broadly in the near

Most Districts reported price growth slowed overall, decelerating faster in manufacturing and consumer-goods sectors.
However, contacts in several Districts highlighted sharp increases in property insurance costs during the past few
months. Contacts in several Districts indicated input price growth slowed less than selling prices, as businesses struggled to pass along cost pressures. As a result, profit margins reportedly fell in several Districts.

Highlights by Federal Reserve District

New York

Business activity expanded modestly on balance. New
car inventories normalized further but used cars remained scarce. Home sales fell further, resulting in a
disappointing spring and summer season. Concerning
the outlook, fewer contacts mentioned a recession as a
looming risk and pricing pressures were expected to
ease further.

Regional economic activity held steady through the
summer. Labor market conditions generally remained
solid, with steady wage growth. Consumer spending
grew steadily, while manufacturing activity declined.
Home sales remained constrained due to low inventory
and rising mortgage rates. Inflationary pressures picked
up slightly after easing much of the past year.


National Summary

St. Louis

Business activity continued to decline slightly during the
current Beige Book period. Although manufacturers
indicated an uptick in August, consumer spending declined overall as did nonmanufacturing activity. Labor
availability improved further, and employment edged up
once more. Wage growth and inflation continued to
subside. Sentiment was somewhat divided, but expectations generally grew more positive.

Economic conditions have remained unchanged since
our previous report. Employers reported continued tight
labor markets and easing wage growth. Businesses
struggled to pass on price increases and reported continuing increases in price sensitivity and weaker demand
for high-end goods.

Regional economic activity crept up on balance. Employment grew slightly, with hiring activity remaining healthy.
Wage pressures were flat, while job seekers prioritized
work-life balance. Prices increased moderately; firms
were finding it harder to pass on higher costs. Consumer
spending rose and auto sales benefited from improved
inventory. Manufacturing and real estate activity fell;
farm conditions weakened.

Economic activity was generally flat in the Fourth District,
though conditions shifted notably in some industries.
While consumer spending and demand for manufactured
goods softened, freight activity stabilized, and nonresidential construction activity increased. Contacts expected similar economic conditions to persist in the near

Kansas City


Economic activity across the District was stable over the
last two months. Manufacturing production and sales at
service businesses improved due to a greater ability to
meet existing orders, as delays along supply chains
were resolved. Job growth remained flat, but wage
growth continued to exceed historical norms and businesses’ expectations. Contacts renewed expectations
for slower wage growth ahead. Prices grew at a
moderate pace.

The regional economy grew slightly in recent weeks.
Consumer spending on retail and food service, as well
as on travel and tourism, picked up modestly. Manufacturers noted a decrease in demand. Transportation
volumes remained steady across freight modes. Residential real estate was constrained by limited inventory.
Commercial real estate activity and lending declined.
Employment increased moderately and price growth
eased slightly.


Economic activity grew modestly. Labor markets improved, and wage pressures eased. Nonlabor costs
moderated, on net. Retail sales were robust. New auto
sales were strong. Domestic leisure travel slowed, while
international and business travel rose. Housing demand
was durable. Transportation activity slowed. Energy
demand was strong. Agricultural conditions were mixed.

Modest expansion continued, though activity was mixed
across sectors. Solid growth was seen in the nonfinancial services sector, while retail sales were flat and
activi-ty in the manufacturing, energy, and financial
services sectors declined. Employment growth picked up
slightly overall, and wage growth remained high. Price
pressures remained elevated in the service sector.
Outlooks were fairly stable, though uncertainty persists.


San Francisco

Economic activity increased slightly. Employment increased moderately; business and consumer spending
increased slightly; construction and real estate was flat;
nonbusiness contacts saw little change in activity; and
manufacturing decreased slightly. Prices and wages
rose moderately, while financial conditions tightened
moderately. Expectations for farm incomes in 2023 were
little changed.

Economic activity strengthened slightly. Labor availability
improved and wage pressures softened further. Price
increases persisted, albeit at a slower pace. Retail sales
rose slightly, on balance, and manufacturing activity was
stable. Lending activity moderated in recent weeks.
Local communities observed increased demand for
support services, particularly in areas impacted by wildfires and other severe weather in Hawaii and California.


Federal Reserve Bank of

The Beige Book ■ August 2023

Summary of Economic Activity
Business activity expanded modestly on balance, as real estate markets continued to lag other sectors of the First District’s economy. Employment was about flat, wages grew at a modest pace, and price increases were generally small.
Consumer spending on retail goods and hospitality services increased moderately. Manufacturers gave mixed results,
but revenues increased at a moderate pace on average. Home sales fell further on rising mortgage rates. Nonetheless,
home prices continued to climb at an above-average pace from a year earlier owing to sharp inventory declines for the
same period. Commercial real estate activity was limited but stable. Contacts across all sectors expected relatively
stable activity moving forward, with further easing of pricing pressures, and fewer of them mentioned the possibility of a
recession when considering the outlook.

Labor Markets


In First District labor markets, employment was roughly
flat, and wages grew at a modest pace. Labor supply
increased at least slightly for a diverse range of positions
and many contacts said that it had become easier to fill
job vacancies. Labor demand was described as steady
but relatively modest in comparison with a year earlier,
and contacts reported only selective layoffs. Reduced
attrition also contributed to a more stable employment
environment. A restaurant industry contact said that
existing workers took on more shifts and more new
workers were available, developments which were attributed to the looming return of student loan repayments. Contacts in multiple industries noted that enticements such as flexible arrangements and sign-on bonuses had become less common. Wage increases were
modest on average, but some employers said that the
pace of wage growth remained above pre-pandemic
norms, while a contact in the healthcare sector said that
starting wage levels were down sharply from their pandemic peaks. A workforce development contact described sustained success placing workers with physical
or developmental disabilities, and expressed confidence
that placing workers from non-traditional backgrounds
would remain possible moving forward, even with some
uptick in unemployment. Moving forward, contacts mostly expected current labor market trends to continue, with
some further softening of demand possible but no major

Prices increased only slightly on average. Contacts
largely reported that pricing pressures moderated further, and in some cases prices decreased outright. At
Boston-area hotels, average daily room rates stabilized,
rising only slightly from one year ago following several
months of robust price growth. Retail sticker prices were
flat but effectively down slightly because of increased
promotions. Wholesale food prices for restaurants fell
modestly, the first decline in several years, and menu
prices were flat. Discounts on new automobiles returned
as inventories approached normal levels, but prices on
used vehicles remained elevated. Manufacturing contacts, with one exception, reported stable or decreasing
prices, and transportation costs in particular were lower. However, one manufacturer continued to post high
single-digit price increases in order to offset increases in
labor and nonlabor expenses. Contacts were sanguine
that inflationary pressures would continue to ease moving forward.

Retail and Tourism
Among First District contacts, retail and restaurant sales
increased moderately in recent months. An online retailer experienced an uptick in sales volume partially attributed to offering discounts on more products. A discount retailer saw further modest improvements in sales
volumes, pointing to an improved inventory. A representative for automotive dealerships reported steady


Federal Reserve Bank of Boston
sales and improved inventories of new cars but said that
inventories of used cars remained depressed. A Massachusetts restaurant industry contact reported an aboveaverage seasonal sales uptick for July, particularly on
Cape Cod and in Boston’s Seaport. Nonetheless, August
brought somewhat softer restaurant sales, especially in
suburban areas. Occupancy rates rose modestly for
Boston area hotels in recent months, but average daily
room rates levelled off. Retail and tourism contacts alike
had a stable outlook, cautiously optimistic for sustained
modest growth for their own businesses in the near-term.

mand for medical office space, however. In the industrial
market, leasing activity slowed further on softer demand
and very low vacancy rates, although some large new
spaces were set to come online in Rhode Island. In the
retail market, contacts said that grocery-anchored suburban shopping centers enjoyed decent leasing activity
that outperformed expectations. Otherwise, the retail
market was mixed, with flat or rising vacancy rates.
Across markets, high borrowing costs continued to limit
investment sales, impeding price discovery. Contacts
anticipated that sales volume would remain low through
at least the end of 2023. Multiple contacts expected a
modest uptick in office leasing in the fall, mostly due to
seasonal trends but also due to stricter return-to-office
policies. The industrial market was expected to weaken
further moving into late 2023.

Manufacturing and Related Services
Manufacturing revenues increased moderately on average, but about half of firms reported either flat or somewhat softer sales. Those with disappointing results included a testing equipment manufacturer that endured
weaker-than-expected demand from China and a semiconductor manufacturer that was vulnerable to decreased PC and smartphone sales. In contrast, a veterinary products maker experienced strong revenue growth
in line with expectations, and a maker of leather goods
reported very strong revenue growth led by online
sales. Employment was stable among our contacts. One
contact reported a major upward revision in capital expenditure plans, buoyed by several years of strong
sales. The outlook was roughly stable or slightly improved, with most contacts at least cautiously optimistic
about their firms’ near-term prospects. However, some
contacts cited further weakness in demand from China
as a significant downside risk.

Residential Real Estate
Throughout the First District, considerably fewer singlefamily homes and condos were sold in July 2023 than
were sold at the same time last year. A Massachusetts
contact said that the state’s closed sales fell abruptly in
July from the previous month, owing to further increases
in mortgage rates, as Boston experienced its weakest
July for single-family sales since 2010. Prices increased
at a solid pace from July 2022, generally rising by between 5 and 10 percent. These trends were accompanied by a substantial year-over-year drop in inventory
across New England, with the sole exception of Maine,
which bucked the trend and saw growth in the number of
single-family homes and condos on the market. Multiple
contacts pointed to high mortgage rates as a cause of
these inventory constraints, mentioning that many homeowners are hesitant to sell houses whose mortgages
they obtained under more favorable conditions. One
Massachusetts contact suggested that state legislation
eliminating barriers to construction may help to alleviate
inventory challenges going forward but cautioned that
any effects would likely not appear before next year.■

Staffing Services
First District staffing firms reported modest revenue
gains on balance in the third quarter, although some said
that revenues had fallen slightly below normal levels
recently. Contacts noted slight increases in labor supply
and modest but steady demand for most roles. Only
selective layoffs were reported. Staffing contacts enjoyed
increased revenues from temporary placements, driven
by elevated pay rates for such roles, which had largely
evaporated during the pandemic. While most job candidates still preferred permanent, direct-hire positions,
temporary roles offering higher wages were nonetheless
seen as a reasonable alternative. The outlook was quite
mixed and uncertain, with about flat performance expected on balance for the rest of 2023.

Commercial Real Estate
The commercial real estate market of the First District
was described as mostly stagnant in recent months. In
the office market, few leases were signed, rents were
flat, and vacancy ticked up slightly from fresh sublease
offerings. Multiple contacts reported strengthening de-

For more information about District economic conditions visit:‐economy


Federal Reserve Bank of

New York
The Beige Book ■ August 2023

Summary of Economic Activity
Economic activity in the Second District held steady in the latest reporting period. While contacts noted some slowing in
hiring, labor market conditions generally remained solid, with ongoing modest employment gains and steady wage
growth. Inflationary pressures increased slightly after easing much of the past year. Supply availability continued to
improve, though manufacturing activity contracted. Consumer spending grew steadily, led by spending on experiences,
while spending on goods sagged. Tourism activity in New York City continued to grow through late summer, inching
back toward pre-pandemic levels. Exceptionally low inventory continued to restrain home sales. Commercial real estate
markets were mostly unchanged, with some further weakening in the office sector. Conditions in the broad finance
sector stabilized following a period of pronounced weakness, though, on balance, loan demand continued to decline
and delinquency rates edged up. Looking ahead, businesses have become somewhat more optimistic about the economic outlook.

Labor Markets


Labor market conditions generally remained solid, though
contacts noted some slowing in hiring. Overall, employment continued to increase modestly, with stronger gains
seen among wholesalers, personal service firms, and
businesses in education & health, while hiring remained
weak among manufacturers. Contacts generally reported
ongoing low attrition rates as workers remained nervous
about switching jobs in the current economic environment.

Inflationary pressures increased slightly after easing for
much of the past year. Both service firms and manufacturers reported that input price increases picked up a bit
in recent weeks. One contact noted substantial increases in insurance costs. Selling prices have increased at a
steady pace for both service firms and manufacturers,
though contacts at retail businesses reported that selling
prices had flattened and expect little change in the
months ahead. Contacts noted that consumers have
become more price-conscious, and now price is often
the most important factor in purchasing decisions.

While remote work has remained prevalent in the region’s service sector, several contacts reported that postpandemic return-to-office requirements are increasingly a
source of friction in hiring and job negotiations. Still,
employers offering remote work noted improved ease of
hiring and worker retention.

Consumer Spending
Consumer spending increased steadily in the latest
reporting period. Spending on travel, entertainment, and
restaurants & bars has continued to rise since the last
report, though department store contacts noted goods
sales have sagged, particularly for seasonal apparel.
Auto dealers in upstate New York reported that new car
sales edged up slightly as more inventory became available. With solid lingering pent-up demand, new inventory
has been turned over quickly. Even so, some auto manufacturers have continued to use targeted incentives—
subsidized financing in particular—to boost sales of
certain models. Used car sales increased in recent
weeks spurred by softening prices.

Business contacts generally reported ongoing steady
wage growth, though a large payroll firm in upstate New
York indicated that the pace of growth has moderated
somewhat as labor market conditions have become more
normalized and worker shortages have eased. Still, the
supply of workers remains a challenge in the region,
especially for the leisure & hospitality sector. On net,
businesses in most sectors plan to increase employment
in the coming months.


Federal Reserve Bank of New York
Manufacturing and Distribution

leaves little choice for potential sellers, making low inventory self-reinforcing.

Manufacturing activity contracted during the latest reporting period. Supply availability continued to improve,
delivery times held steady, and inventories declined.
Businesses in transportation & warehousing also reported declining activity, while wholesalers reported that
activity increased slightly. Manufacturing and distribution
firms have become notably more optimistic about the
economic outlook.

Residential rental markets continued to tighten. In New
York City, rents climbed to new highs, though a decline in
new lease activity during the high season suggests some
slowing ahead, even amid historically low vacancy rates.
Rents also continued to rise in upstate New York.
Commercial real estate markets were mostly unchanged.
The office market deteriorated slightly, with modest increases in vacancy rates and declines in rents. New York
City’s retail market was little changed in the last reporting
period, with steady vacancy rates, rents, and leasing activity. While the industrial market generally remained firm,
rents declined and vacancies climbed in northern New

Service sector activity has been mixed. Businesses in
the information, education & health, and leisure & hospitality sectors reported increasing activity, while contacts
in the business services and personal services sectors
saw activity decline. Looking ahead, service firms were
fairly optimistic that conditions would improve in the
coming months.

Overall, construction contacts reported that conditions
stabilized over the summer. Office construction in New
York City continued to slow, but office construction in
upstate New York and northern New Jersey remained at a
moderate pace. Industrial construction activity was strong
and steady. Much of the District saw increased multi-family
residential construction starts, but in upstate New York
activity was minimal, with no construction starts and a
slight decline in units under construction.

Tourism activity in New York City continued to grow
slowly through late summer, inching back toward prepandemic levels. While the number of travelers is nearly
back to normal, tourists are substituting lower-cost experiences for premium ones — such as partaking in casual
dining instead of fine dining or staying at reduced-service
hotels. Meanwhile, some hotels and restaurants are
making do with fewer workers by reducing service levels
and business hours. Looking ahead, China’s recent
decision to remove pandemic-era restrictions on group
travel to the United States is expected to boost tourism
in New York City.

Banking and Finance
Conditions in the broad finance sector stabilized following
a period of pronounced weakness. Small to medium-sized
banks in the District reported lower loan demand in all loan
categories. Bankers were split on the changes in loan
interest spreads over the past two months, with as many
reporting widening spreads as reporting narrowing
spreads. On balance, banks reported tighter credit standards, higher deposits, and rising delinquency rates.

Real Estate and Construction
Exceptionally low inventory has continued to restrain
home sales activity across the District, pushing up prices
and frustrating potential buyers. With few properties to
choose from, bidding wars remained prevalent in upstate
New York and in the suburbs around New York City. By
contrast, inventory hovered near historic norms in Manhattan, leaving buyers less pressured. Still, home prices
were steady to up slightly, and affordability was at a long
-time low. Contacts noted some concern that the resumption of student loan payments in October will make
it even more difficult for some to afford purchasing a

Community Perspectives
Community contacts reported that rising numbers of asylum seekers were increasing the need for the provision of
social services and education across the District. Pressures were particularly pronounced on New York City’s
emergency shelter system. The number of individuals
seeking shelter in New York City has nearly doubled in a
year due to growing numbers of migrant families. The
logistics and budget implications of providing migrants
housing, social, and education services have been challenging for policymakers and community organizations in
the District. ■

The recent rise in mortgage rates has also pushed some
potential buyers to the sidelines. Real estate contacts
reported that homeowners with low mortgage rates do
not want to move, and the resulting lack of inventory

For more information about District economic conditions visit:


Federal Reserve Bank of

The Beige Book ■ August 2023

Summary of Economic Activity
On balance, business activity in the Third District continued to decline slightly. Consumer spending was down in most
sectors, including retail, restaurants, autos, and tourism. High interest rates continued to constrain the available inventory of new homes and have also excluded many low-asset consumers from purchasing homes or cars. Employment
edged up as labor availability continued to improve. Wage growth and inflation continued to subside – both continued to
grow within a modest range. Overall, contacts reported far fewer supply chain disruptions and a lower (steadier) cost of
goods for their inputs. Contacts continued to note tighter credit standards. Credit quality remains very good, despite a
slight rise in delinquencies. On balance, firms continued to expect slight growth over the next six months – weaker than
the norm for an expansionary period. Sentiment is divided. A few contacts stated that their sectors were in a recession.
However, most expressed that there were no signs of a recession, and many were more optimistic for a soft landing.

Labor Markets

skill workers, especially among smaller firms, but that
unusually high salary demands from professional workers had waned.

Employment appeared to edge up after falling slightly
during the prior period. Staffing firms and other contacts
reported an improving labor market, with more job candidates, better retention, and fewer callouts for sick time,
but many also noted a lower quality of applicants.

On a quarterly basis, firms’ expectations of the one-yearahead change in compensation cost per worker fell to a
trimmed mean of 4.3 percent in the third quarter of 2023,
from 4.6 percent in the second quarter (and from a peak
of 5.8 percent in the third quarter of 2022). Expectations
averaged 3.2 percent prior to the pandemic. Expected
compensation growth fell to 4.4 percent for manufacturers and to 4.1 percent for nonmanufacturers.

Contacts noted few layoffs but less job loyalty. Although
turnover has improved, it remains high during a worker’s
first year. Several contacts noted burnout of tenured
employees, especially in health care, and also observed
that an emphasis on return-to-office strategies significantly impacts working single mothers.


In our monthly surveys, employment grew slightly as the
share of nonmanufacturing firms that reported increases
in full-time and part-time jobs rose. This was offset, in
part, by a rising share of manufacturing firms reporting a
decline in overall jobs.

On balance, inflation subsided further in the third quarter –
continuing in the more modest range that began in the
second quarter. Moreover, reports of price increases were
below historical trends for manufacturers’ inputs and for
nonmanufacturers’ outputs. Expectations of future price
hikes edged lower.

Firms reported that wage inflation remained at a modest
pace overall – near pre-pandemic levels – and continued
to slowly subside. Moreover, firms expected worker
compensation increases to subside further in 2024.

Contacts reported that increases in prices received for
their own goods and services over the past year edged
lower in the third quarter of 2023 compared with the second quarter. The trimmed mean for reported price changes, as indicated by responses to our quarterly survey
questions, fell to 4.5 percent from 4.6 percent for all firms.
Price increases remained at 3.7 percent among nonmanufacturers and fell to 5.3 percent from 5.8 percent for man-

In our monthly surveys, the distribution of nonmanufacturing firms reporting higher or lower wage and benefit
costs per employee remained typical of the prepandemic era, when modest wage growth prevailed.
Contacts noted some ongoing wage pressure from low-


Federal Reserve Bank of Philadelphia
ufacturers. Reported price increases had peaked during
2022 at 5.8 percent for nonmanufacturers and at 10.4
percent for manufacturers.

Nonfinancial Services
On balance, nonmanufacturing activity declined slightly –
after a more modest decline in the prior period. Contacts
noted fewer concerns of a recession – invoking a soft
landing instead. The index for expected growth over the
next six months has risen since the prior period – nearly
to its nonrecession level, although it slipped a little in

In our monthly surveys, the diffusion indexes remain
somewhat elevated for prices paid by nonmanufacturers
and for prices received by manufacturers compared with
their nonrecession averages. However, for prices paid by
manufacturers and for prices received by nonmanufacturers from consumers and other buyers, the indexes are
below their nonrecession averages.

Financial Services
The volume of bank lending (excluding credit cards)
resumed growing moderately during the period (not
seasonally adjusted) – after slowing to a modest pace
last period. Loan growth was also modest during the
comparable period in 2022.

Looking ahead one year, the increases that firms anticipated in the prices for their own goods fell further – the
trimmed mean for all firms fell to 3.7 percent in the third
quarter of 2023. It has fallen from a peak of 5.9 percent in
the fourth quarter of 2021. The expected rate of growth
edged up to 4.1 percent for nonmanufacturers but fell to
3.3 percent for manufacturers.

During the period, District banks reported strong growth
in home mortgages and auto loans, modest growth in
other consumer loans, and slight growth in commercial
real estate lending and commercial and industrial loans.
The volume of home equity loans fell slightly. Credit card
volumes rose moderately following a stronger surge last
period. The pace was also slower than the comparable
period last year.

Manufacturing activity turned positive in the latter half of
the period – generating slight growth overall after a year
of declines. The August indexes for general activity and
for new orders were just above their nonrecession averages. The sudden uptick in the indexes was primarily
driven by fewer firms reporting decreased demand rather
than by more firms reporting increased demand.

Banking contacts and large service companies continued
to report good credit quality – noting only small upticks in
loan delinquencies, which remain at very low levels.
Market participants noted that higher interest rates and
tighter credit standards had sidelined many deals and
were especially challenging for small businesses.

Most contacts noted ongoing improvements in the supply
chain, with a return to normal for many. Despite the uptick, sentiment weakened, as expressed by one contact,
who said, “The chatter is things are slowing down; we
are just not seeing or experiencing [a recession].” Large
firms with extensive linkages to the broader economy
also noted steady activity and no signs of a recession.

Real Estate and Construction
Existing home sales resumed a slight downward trajectory – well below the prior-year level. Brokers noted that
high interest rates are now constraining the demand for
existing homes largely to high-asset buyers. However,
that demand remains greater than the still-shrinking
inventory – driving prices higher and low-asset buyers
into rental units. New home builders reported a steady
flow of contract signings as well-heeled buyers sought
alternatives to the sparse existing home market.

Consumer Spending
Consumer spending continued to decline slightly. Contacts noted that consumers were purchasing fewer items
and were trading down by shopping for lower-priced
goods and at discount stores. A fast-casual restaurateur
reported a slowdown and noted “consumer fatigue from
price increases.” However, this behavior was described
as a “slight belt tightening,” not as a recession.

Market participants in commercial real estate reported a
slight uptick in construction activity. While the demand
for new office and warehouse space has largely evaporated, ongoing bids for institutional, multifamily residential, and public infrastructure projects have extended the
pipeline of new projects and sparked a “shred of optimism.” The office market contracted modestly as leases
rolled over into spaces with smaller footprints. ■

Auto dealers reported a slight decline overall, although
sales held steady for some. While inventories continued
to improve, interest rates and high prices have excluded
some buyers. Several contacts noted that sales of some
electric vehicle models had softened.
Tourism contacts reported a slight decline overall – led
by falling demand from high levels of activity at many
Third District leisure destinations, in part because more
travelers are going abroad again. The recovery at urban
destinations leveled off.

For more information about District economic conditions visit:


Federal Reserve Bank of

The Beige Book ■ August 2023

Summary of Economic Activity
On the surface, business activity in the Fourth District was little changed from that of the prior reporting period, though
there were some notable shifts in industry conditions. Consumer spending softened in recent weeks after firming during
the previous three periods. Similarly, demand for manufactured goods decreased slightly, a situation which many contacts attributed to continued inventory correction. Meanwhile, freight activity appeared to stabilize, though it remained
weak. Nonresidential construction activity increased, and contacts reported that clients were moving ahead with new
and previously postponed projects. Looking forward, contacts generally expected little change in overall business activity in the near term. On balance, contact reports suggested that employment increased slightly. Many firms reported that
hiring was easier and turnover had declined. Upward pressures on wages, nonlabor input costs, and prices were relatively unchanged from those of the previous reporting period, but, in each case, these have eased considerably from
those of the prior year.

of costs. Per one construction contact, “nobody’s raising
prices, nobody is decreasing [them].” Some manufacturers stated that costs for many materials, such as resins,
were flat, while costs for other materials, such as steel
and lumber, had declined. Looking forward, contacts
expected that nonlabor input cost pressures would continue to ease.

Labor Markets
On balance, Fourth District employment increased
slightly, though contact reports varied more than in the
recent past. On one hand, some manufacturing, construction, and freight contacts increased staffing levels in
key areas to reduce backlogs, handle new projects, or
meet higher-than-expected demand. On the other, some
manufacturing and financial services contacts reported
increased layoffs and cited tight margins and declining
demand. Moreover, several firms that were trying to
reduce staffing through attrition said that lower turnover
prevented them from doing so; thus, they were forced to
lay off workers. Several contacts noted that hiring had
become less difficult. Contacts generally expected employment to continue increasing slightly in the near term.

General price pressures were largely unchanged from
those in the prior reporting period. However, compared
to the number of contacts early in the year, a narrower
set of contacts was willing (or able) to push through price
increases. Many contacts reported increased price sensitivity among their clients, and some freight contacts
reported increasing some price concessions to remain
competitive. One freight hauler said, “Even our best
customers are regularly seeking rate concessions.” That
said, several manufacturing and construction contacts
raised prices to cover increased costs.

Wage pressures have eased since the start of the year,
though they changed little from those in the prior period.
Firms across industries more frequently reported transitioning from previous unscheduled cost-of-living increases to regular annual wage increases. One tourism contact said there would be “no across the board increases
like last year” because he was able to be selective when
increasing pay.

Consumer Spending
Consumer spending softened somewhat in recent
weeks. Goods spending remained weak amid high interest rate's dampening sales of big-ticket items and elevated price's constraining discretionary spending. Auto
dealers said that sales slowed because of higher interest
rates and that inventories had increased. Moreover,
some said that the pent-up demand built during pandemic-era supply shortages had been mostly exhausted. A
large general merchandiser noted that discretionary

Similar to wage pressures, nonlabor input cost pressures changed little from those in the prior period,
though they have eased since the start of the year. On
balance, contacts across industries noted a “leveling off”


Federal Reserve Bank of Cleveland
goods spending was down as customers continued to
spend more on food and other essentials. By contrast,
apparel retailers reported steady or strong sales, and
one noted that back-to-school sales had increased from
those of the prior year. Services spending moderated
compared to that in recent reporting periods, with, for
example, restauranteur's reporting generally flat sales.
Looking ahead, contacts expected demand to change
little in coming months.

balances or sought higher-yield alternatives. In the
months ahead, lenders expected loan demand to remain
flat and higher interest rates to discourage borrowing.

Nonfinancial Services
Freight activity remained tepid this reporting period.
Haulers reported that weaker demand for consumer
goods and firms’ desire to draw down inventories contributed to ongoing weakness in the sector. However,
contacts indicated that conditions stabilized somewhat
compared to those in previous reporting periods and
were optimistic that volumes would increase in the coming months ahead of the holiday season. Overall, professional and business service contacts reported that demand increased recently. In the months ahead, contacts
anticipated that demand would be relatively flat as clients
curtailed spending in the face of economic uncertainty.

Demand for manufactured goods decreased slightly.
Some contacts reported that new orders had declined as
pandemic-era supply shortages subsided and customers
no longer needed to keep excess inventory. By contrast,
steel manufacturers generally reported steady or increased orders following an expected seasonal slowdown spanning the first half of July. One manufacturer
tied to light vehicles noted stronger orders because of
increased vehicle production by auto manufacturers. On
balance, manufacturers expected customer demand to
remain soft in the coming months.

Community Conditions
Nonprofits noted increased demand for their services.
For example, one entity providing mental health and
addiction treatment services received 50 applications for
just two openings in the program, with wait times as long
as nine months. Several nonprofits said that hiring and
retaining staff had been particularly challenging, and one
large community service provider reported that it was 40
workers shy of its desired staffing level of 170. Contacts
cited three primary reasons for the hiring challenges.
First, pay rates among nonprofit entities were not competitive with those in the for-profit world. Second, limited
childcare and transportation options were more likely to
adversely affect workers in the nonprofit sector. Third,
funders often earmarked dollars for the provision of
services without earmarking accompanying funding for
overhead. For example, donations to food banks were
often reserved for the purchase of food, but not for the
overhead associated with getting the food to those in
need. One contact noted that what was needed were
unrestricted funds to cover operational costs, including
those for staffing. ■

Real Estate and Construction
New home sales remained strong, though one contact
suggested that construction was slowing because
“interest rates have finally taken their toll” and discouraged developers from investing to create buildable lots.
This contact indicated that slower construction would
exacerbate an ongoing severe shortage of inventory on
the existing side, something which had been constraining sales for several quarters. In the coming months,
contacts generally expected demand to decline in the
face of elevated interest rates and higher home prices.
Nonresidential construction activity increased somewhat.
Multiple general contractors reported new projects,
stronger backlogs, or past clients’ decisions to proceed
with previously postponed plans. Demand for office
space remained weak, but one contact noted that the
return of more workers to the office boosted the firm’s
commercial leasing activity. Nonresidential construction
and real estate contacts expected activity to be stable in
the months ahead.

Financial Services
Bankers indicated that higher interest rates and economic uncertainty continued to dampen loan demand from
households and businesses. One lender reported that
many firms were opting to “wait and see” before moving
forward with projects. Overall delinquency rates remained near historically low levels, despite some banker's reporting slight increases in delinquencies. Core
deposits declined slightly as customers spent down their

For more information about District economic conditions visit:


Federal Reserve Bank of

The Beige Book ■ August 2023

Summary of Economic Activity
The Fifth District economy grew slightly in recent weeks. Retailers and food service contacts reported steady to modest
growth in sales, despite lower foot traffic. Auto sales were solid this period, but other consumer durables saw declines.
Travel and tourism rose modestly as summer vacations were in full swing. Nonfinancial services firms noted stable
demand, even with price increases caused by higher costs. District ports remarked that imports slowed as retailers and
manufacturers still had elevated inventory levels. Loaded exports, particularly agriculture products, remained strong.
Fifth District manufacturers reported a slowdown this period. Trucking firms reported steady, but low, levels of freight
volumes this cycle. Residential real estate respondents stated that the limited inventory of homes for sale has put upward pressure on sales prices. Commercial real estate markets slowed this period; however, leasing remained strong
for retail and industrial properties with rents continuing to escalate. In contrast, office and multifamily rents were starting
to soften. Loan demand was stable this period despite shrinking deposit levels at banks. Employment increased modestly but at a slower pace than in previous reports. Many contacts indicated that the labor market remains extremely
tight but wage growth eased slightly. Price growth continued to ease but remained elevated compared to pre-pandemic

Labor Markets


Employment in the Fifth District increased modestly over
the most recent reporting period but at a slower pace
than in previous reports. Some contacts stated that the
labor market remained tight and were doing what they
can do to find employees. A recruiting agency’s clients
are bypassing temp-to-hire workers and just bringing
them on full-time. A bearings manufacturer reported that
their skilled tradesmen were approaching retirement, so
the company was trying to revitalize their apprenticeship
program to train young adults out of high school and
community colleges. An office furniture installation company reported that when people do show-up for interviews, their wage demands were too high to match their
skill set.

Fifth District manufacturing slowed somewhat in the
most recent reporting period. A steel coater stated that
the economy is in a “caution zone” and their customers
are only ordering products they know they can sell quickly. A fabrics manufacturer reported that their business is
volatile due to the fact that their customers do not have
the confidence to hold much inventory. Finding workers
remained a significant issue, and firms are finding ways
to minimize costs associated with hiring. A coffee manufacturer cited that they cannot pass costs on to customers anymore and will invest in technology throughout the
production process to rely less on labor.

Ports and Transportation
Fifth District ports stated that loaded import volume was
down but back to pre-pandemic levels. Imports were
lower year-over-year but flat month over month; the
decline in import volume was mainly due to a decrease
in consumer goods. Exports were slowly ticking up,
primarily for agricultural products, wood pulp, resins, and
vehicles. Spot shipping rates decreased and were slightly lower than 2019. Carriers had reduced shipping capacity in order to maintain price. Gate turn times improved and container dwell times returned to normal
levels. Demand for airfreight stabilized after declining
over the last 18 months and air cargo rates dropped

Price growth eased somewhat in recent weeks but remained elevated. According to our most recent surveys,
growth in prices received by manufacturers declined to
an annual rate of just over three percent. Service sector
price growth also eased slightly but remained more
elevated at a five percent growth rate. A plumbing supply
company said material costs had fallen and they were
passing along those savings by lowering their prices.
Several service providers noted that wage pressures
eased as the availability of labor improved somewhat,
which helped to slow the increases in labor costs.


Federal Reserve Bank of Richmond
precipitously, but both are still above pre-pandemic

remained strong for retail and industrial properties with
rents continuing to escalate. In the office market, companies were looking to decrease rental cost by downsizing
and relocating to smaller footprints in higher quality
buildings. Rental rates in the office segment remained
flat; however, landlords were offering more incentives
and/or concessions to potential tenants. In the multifamily sector, rents were starting to soften partially caused by
a new supply of multifamily units coming onto the market. Respondents stated that some banks have pulled
back on new commercial real estate lending activity and
that, coupled with higher interest rates, has made deals
less attractive, and in some cases, not viable.

Trucking firms reported that with the decrease in the
number of carriers, there have been incremental opportunities to pick up freight. Demand was steady this period as there was no sizable decrease in freight volumes.
Spot rates increased slightly, particularly with third party,
transactional freight. However, respondents indicated
that they were able to get moderate increases with their
contract rates despite customers being very price sensitive. Trucking companies indicated that drivers were
more readily available but that job openings for mechanics and shop staff were still difficult to fill. Firms also
stated that they were experiencing higher costs of labor,
parts and new equipment.

Banking and Finance
Loan demand was unchanged in recent weeks and has
returned to pre-Covid levels. This stable demand has
been noted across all loan portfolios, consumer and
commercial. One observation was loans were being
originated for only what must be done and no more.
Home equity loans and lines saw an increase in demand, with respondents noting borrowers were not keen
to refinance lower rate first mortgages for their needs.
Deposit levels continued to shrink, and competition for
balances was still strong. Credit quality continued to be a
concern as the cost to borrow increased while delinquency rates remained stable at low levels.

Retail, Travel, and Tourism
Consumer spending grew at a modest rate in recent
weeks. Retail and food service contacts reported steady
to modest growth in sales despite some declines in foot
traffic as warm weather and summer travel led to fewer
customers coming through the doors. In contrast, a
couple of furniture stores saw sales decline as a result
of the softness in real estate markets. Auto sales remained solid this period.
Travel and tourism rose moderately as summer travel
was in full swing. Coastal areas of North and South
Carolina saw strong visitation with increased room
nights sold and high levels of occupancy. Average room
rates were down slightly compared to last year but revenue was still up, overall, because of the strong growth in
room nights sold. An airport reported strong passenger
traffic and increased seat capacity but fewer flights as
larger aircraft were being utilized.

Nonfinancial Services
Nonfinancial service providers continued to report that
demand for their services as well as revenues had remained stable. One respondent observed that demand
continued, even with price increases due to higher costs.
Some noted that clients were finding themselves constrained due to the increasing lack of access to capital,
keeping their growth muted. Labor shortages continued
to ease, but wage pressures continued to be present in
the marketplace. An overall sense of economic uncertainty was noted with many of the respondents, driving
much of the decision making at their firms as well as
their clients. ■

Real Estate and Construction
Residential real estate respondents indicated that the
limited inventory of homes for sale has boosted competition among buyers and has put upward pressure on
sales prices. Sellers who secured low mortgage rates
have been hesitant to sell, leaving a dearth of new listings leading to a decrease in closed sales. Overall,
home sales were constrained by both affordability and
by the lack of inventory. In the last month, buyer traffic
was lower due to the usual seasonal slowdown. Days on
market increased slightly, mostly related to stale inventory. Prospective buyers were not having any difficulties
obtaining mortgages. Home builders indicated that
construction costs leveled off but remain high relative to
pre-pandemic levels.

Overall market activity in the Fifth District commercial
real estate sector slowed this period. However, leasing

For more information about District economic conditions visit:


Federal Reserve Bank of

The Beige Book ■ August 2023

Summary of Economic Activity
The economy of the Sixth District grew at a modest pace from July through mid-August. Labor availability and retention
improved, and wage pressures eased. Nonlabor input costs moderated further, and pricing power diminished somewhat. Retail sales were strong. New auto sales were robust; the sale of used vehicles slowed. Domestic leisure travel
slowed while business and international travel improved. Housing demand was healthy, existing home inventories remained low, but new home inventory increased. Commercial real estate conditions were mixed. Transportation activity
softened. Loan growth was solid except for consumer loans, and delinquencies remained low. Energy demand was
strong amid high summer temperatures. Agriculture demand was unchanged.

firms were holding prices steady. The Atlanta Fed’s
Business Inflation Expectations survey showed yearover-year unit cost growth was little changed at 3.3
percent, on average, in August, from 3.2 percent in July.
Firms' year-ahead inflation expectations decreased in
August to 2.5 percent, on average, from 2.8 percent in

Labor Markets
Most contacts continued to report improvements in labor
availability and retention; however, some firms slowed
the pace of hiring or reduced headcount. Despite improvements, labor availability remained a top priority for
employers. Some expected skill shortages to persist and
were investing in technology and automation to reduce
reliance on a shrinking workforce. Employers in south
Florida and along the Gulf Coast reported that the cost of
living, particularly housing, restricted the supply of workers. Employers noted a growing preference among
workers for fewer work hours and greater flexibility.
Reactions to a new Florida immigration law were mixed;
several noted no impact to business, while others said
workers were leaving the state.

Community Perspectives
Contacts serving low-income communities described
economic conditions as largely unchanged to slightly
declining. Capital and credit deployment to small businesses slowed due to rising borrowing costs and tighter
underwriting standards. Lenders and investors expect an
increase in small business capital availability with the roll
out of federal programs like the State Small Business
Credit Initiative. On the consumer side, several finance
and credit contacts noted that delinquency rates for
automobile loans and some credit card accounts rose
slightly, and elevated auto delinquencies among lowerincome populations are anticipated going forward. Contacts also noted that demand for food and housing assistance remained higher than pre-pandemic levels.

Wage growth remained elevated as compared with prepandemic levels, but most firms noted that wage pressure had eased, and many anticipate further moderation
next year. Some contacts said that lower-wage workers
continued to be attracted away for higher pay, better
working conditions, and greater scheduling flexibility.


Consumer Spending and Tourism

Contacts described nonlabor input costs as continuing to
stabilize, though they were still higher than 2019 levels.
Notable exceptions included rising construction input
costs (like concrete and electrical equipment), which
were in contrast to price deflation in some food products
(like eggs and corn). Property and liability insurance
costs in coastal areas remained a top concern regarding
housing affordability and firms’ investment plans. Pricing
power was largely reported as eroding, though most

District retailers reported that consumer spending was
robust, largely attributed to the strength in employment.
Contacts continued to describe spending shifts away
from discretionary items, though demand for high-end
luxury products remained strong. Automobile dealers
reported that rising inventory levels and demand for new
vehicles drove robust sales; the pace of growth for used
vehicle sales slowed.


Federal Reserve Bank of Atlanta
slowing earnings growth. Despite changes in interest
rates, financial institutions reported stability in their securities portfolios with unrealized losses still elevated compared with pre-pandemic levels.

Tourism contacts reported that demand for leisure travel
slowed, which was considered a normalization of activity
and aligned with expectations following pandemic-driven,
pent-up demand. International, group, and business
travel continued to improve but were not back to 2019
levels. Advanced bookings for the Fall were meeting

Demand for and supply of energy were described as
normalizing, and contacts noted ample reserves to handle increased demand resulting from high summer temperatures. Investment in renewables drove additional
capacity for utilities companies. Contacts reported robust
activity in plant expansions for oil and gas refineries,
chemical manufacturers, and low carbon and green
energy projects. Related to increased energy production,
contacts described strong demand for onshoring largescale modular plant construction since some chemical,
petrochemical, and liquefied natural gas customers were
“burned” by offshoring these builds over the last several
years, which resulted in late delivery and poor-quality

Construction and Real Estate
The housing market throughout the District remained
healthy despite higher mortgage rates. Although the
pace of sales was below that of a year ago, home prices
continued to rise in most markets. Supply shortages in
the resale market persisted, as homeowners with lowrate mortgages were reluctant to sell. The share of new
home inventory increased as builders ramped up construction to meet demand. Builder contacts indicated an
increased reliance on rate buydowns as an incentive to
attract buyers. Builder optimism fell, however, as rising
interest rates and construction costs put strains on affordability and buyers’ ability to qualify.

Agricultural conditions were little changed since the
previous report. Demand for cattle was strong. Egg
supply increased, but the supply of hens remained lower
than normal. The supply of chickens continued to exceed
demand, although there was some improvement in the
market. There continued to be excess supply of milk in
the market. Many row crops were expected to have a
strong harvest. Demand for cotton remained weak, leading some growers to exit the cotton market.■

Commercial real estate conditions slowed. Activity decelerated for high-end multifamily units and industrial real
estate. More contacts reported growing concerns about
financing, as lenders heightened underwriting standards
and reduced funding commitments. Contacts reported
challenges with the availability of financing for office
space, and transaction volume continued to deteriorate.
Participants noted growing uncertainty amid declining
asset values.

Demand for transportation services varied by industry
segment, but was on average, depressed. Trucking firms
reported a continued slump in freight volumes, and ecommerce activity slowed. International air freight remained sluggish amid a global supply chain recovery
and geopolitical issues that strained trade flows. Ocean
carriers reported strong exports to the Middle East and
Asia from the U.S., but trade with Europe softened.
Imports from China fell. Ports experienced mixed demand. Railroads noted fewer shipments of consumer
goods, resulting from the rightsizing of inventories and
mixed consumer spending, but they saw strong activity
in energy, automotive, equipment, and metals.

Banking and Finance
District financial institutions reported sustained solid loan
growth across most portfolios, with the notable exception
of auto and other consumer loans. Most institutions have
yet to report significant increases in delinquencies. Financial institutions continued to fund loan growth using
large time deposits and other borrowings as they faced
increased competition for core deposits. The rising cost
of funds put more pressure on net interest margins,

For more information about District economic conditions visit:


Federal Reserve Bank of

The Beige Book ■ August 2023

Summary of Economic Activity
Economic activity in the Seventh District increased slightly overall in July and early August. Contacts generally expected
a small decline in demand over the next year and many expressed concerns about the potential for a recession in the
U.S. Employment increased moderately; business and consumer spending increased slightly; construction and real
estate was flat; nonbusiness contacts saw little change in activity; and manufacturing decreased slightly. Prices and
wages rose moderately, while financial conditions tightened moderately. Expectations for farm incomes in 2023 were
little changed.

Labor Markets

Multiple retail contacts noted that back-to-school shopping got off to a strong start. Sales of nondurable goods
were largely up, with contacts highlighting increases at
grocery stores, gas stations, and convenience stores. In
contrast, reports on sales of durable goods were mixed.
Retailers expressed a considerable amount of uncertainty over the upcoming holiday season, and contacts said
orders for the second half of this year were conservative.
Leisure and hospitality spending softened slightly but
remained at elevated levels; declines in air travel and
hotels more than offset higher spending at tourist attractions and amusement parks. New and used light vehicle
sales rose, helped by greater availability of more affordable models.

Employment rose moderately in July and early August
and contacts expected a similar rate of increase over the
next 12 months. Many contacts continued to have difficulty finding workers, particularly those with higher skills.
However, many also said hiring had become easier, and
a staffing agency noted a decline in worker turnover.
Manufacturers were responding to slowing demand by
using fewer temporary workers and cutting workers’
hours. Wage and benefit costs rose moderately, though
several contacts noted a slowdown in the pace of wage

Prices rose moderately over the reporting period and
contacts expected a similar rate of increase over the
next 12 months. Nonlabor costs were up modestly, with
a number of contacts highlighting rising energy costs.
Contacts noted slower growth in prices for some raw
materials and price decreases for others. Shipping costs
were little changed, remaining much lower than a year
ago. Consumer prices increased moderately due to solid
demand and the passthrough of higher costs.

Business Spending
Business spending increased slightly in July and early
August. Capital expenditures were up a bit, with several
contacts reporting purchases of new equipment or software, or expansions of existing facilities. Demand for
industrial, commercial, and residential energy grew
slightly. Inventories for most retailers were a little higher
than desired. Auto inventories were little changed and at
a low level. In manufacturing, inventories were slightly
elevated amidst slow demand.

Consumer Spending
Consumer spending increased slightly overall in July and
early August. Nonauto retail sales increased modestly.


Federal Reserve Bank of Chicago
Construction and Real Estate

contacts noting an increase in credit card debt and one
reporting that delinquencies for auto and card debt had
risen back to pre-covid levels. Consumer loan rates were
moderately higher and lending standards tightened

Construction and real estate activity was little changed
on balance over the reporting period. Residential construction increased slightly overall, and contacts noted
that low levels of existing home inventory were making
new homes more attractive. However, some contacts
saw a slowdown in multifamily construction. Residential
real estate activity decreased slightly as low inventories
held back sales. Contacts indicated that homes were
selling quickly, and many received multiple offers. A
banking contact said that borrowers they had prequalified for mortgages were often switching to new
construction after getting frustrated searching for an
existing home. Home prices and rents were up slightly.
Nonresidential construction was little changed. Some
contacts noted a pullback in leading indicators of future
activity such as environmental studies, land surveys, and
financing for speculative development. In contrast, contacts noted progress on a large number of state and
local construction projects. Commercial real estate activity was unchanged. Commercial prices fell slightly and
rents were down modestly in some sectors, most notably
office. Contacts said many investors were holding off
making commercial real estate purchases because they
expected prices to fall further. Vacancy rates were unchanged.

District farm income expectations for 2023 remained
much lower than 2022 levels. However, reduced costs
for some inputs, particularly fertilizers, boosted net income prospects for 2024. Drought concerns lessened
overall, although hot weather toward the end of the
period impaired development of a wide swath of Midwest
crops. Corn, soybean, and wheat prices were down. Still,
there were reports of a slowdown in exports as prices
offered by other producers were more favorable on world
markets. Hog prices moved down after hitting a seasonal
peak. Prices for dairy products rose from low levels, and
egg prices crept up a bit. Cattle prices increased once
again, remaining one of the few agricultural prices above
the levels of a year ago. Farmland prices were still higher than a year ago.

Community Conditions
Community, nonprofit, and small business support contacts reported little change in economic activity from a
robust level. State government officials saw slowing
growth in tax revenues and a small increase in demand
for unemployment insurance. Some small business
lenders noted a slowdown in loan demand, which they
attributed to economic uncertainty. Nonprofit contacts
continued to experience challenges with wage competition from private sector employers, as well as an increase in other operational costs. Nonprofit organizations also said high demand for services was straining
efforts to respond to elevated levels of food insecurity. ■

Manufacturing demand decreased slightly in July and
early August. Supply chain conditions continued to improve, though some contacts reported difficulty acquiring
specialty items like industrial electrical components.
Steel orders decreased modestly, in part due to weaker
demand from the oil and gas and the machinery industries. Fabricated metals orders remained flat. Machinery
sales decreased slightly, with contacts highlighting less
demand from the auto industry. In contrast, auto industry
contacts reported increased auto production despite
supply chain disruptions at some plants. Several contacts expressed concerns about the potential for a UAW
strike to put a hold on a large share of U.S. auto production. Heavy truck orders decreased slightly amidst moderately low inventories.

Banking and Finance
Financial conditions tightened moderately over the reporting period. Bond and equity market asset values
decreased slightly, and volatility edged up. Business
loan demand decreased modestly over the reporting
period, while loan quality remained flat. Business loan
rates increased a bit and standards tightened moderately. Consumer loan demand also decreased modestly.
Consumer loan quality deteriorated some, with multiple

For more information about District economic conditions visit:


Federal Reserve Bank of

St. Louis
The Beige Book ■ August 2023

Summary of Economic Activity
Economic conditions have remained unchanged since our previous report. Employers reported continued tight labor
markets and easing wage pressures. Consumer demand softened slightly. Firms reported continuing increases in consumer sensitivity to sales prices and weaker demand for high-end goods or those that require financing. Banking contacts reported solid credit quality but decreasing loan demand and a continued steady rise in delinquency rates. Home
sales dropped slightly, but contacts reported healthy demand and low inventory. Residential construction was mixed, but
industrial and commercial construction saw growth.

although credit card transaction costs increased, they
have not raised prices in order to stay competitive. More
broadly, a regional survey reported that two-thirds of
consumers delayed or did not buy a purchase because
of higher prices. Some industry contacts reported steady
overall demand, with consumers making substitutions for
cheaper items. Others, such as a tourism contact from
Northwest Arkansas, saw no immediate effect on demand after increasing prices.

Labor Markets
Employment has remained unchanged since our previous report. Labor markets remained tight, and industries
report mixed abilities to attract and retain talent. Contacts in tourism and food service continued to report
struggles filling lower-level job vacancies. A manufacturing contact in Louisville reported having fewer applicants
while requiring higher employment levels due to rising
demand. However, in Little Rock, a banking contact
noted success in retaining more top talent by fast tracking them to better positions.

Consumer Spending
District general retailers, auto dealers, and hospitality
contacts reported mixed business activity and a slightly
negative outlook. July real sales tax collections increased in Kentucky, Missouri, and Western Tennessee
relative to the previous month and decreased in Arkansas. Retailers in St. Louis noted consumers have been
watching their spending and switching to lower-quality
and less-expensive goods. A Louisville auto dealer reported both new and used high-end vehicles are seeing
a slowdown in demand due to affordability issues. This
has been most prominent with full-sized pickup trucks
and used vehicles over $25,000. District restaurant
contacts noted mixed business activity over the past few
months, with inflationary pressures still impacting consumer spending at all restaurants. Little Rock hospitality
contacts noted a rebound in corporate travel. They also

Wages grew moderately since our previous report. On
net, most contacts reported increasing wages over the
previous quarter. Manufacturing contacts in Memphis
reported wage inflation easing, and a hotel industry
contact in Louisville noted employees’ requests for wage
increases have declined.

Many businesses are aiming to maintain prices despite
increasing input costs. The main reason for this is softening demand and increased price sensitivity from
consumers. A respondent from a niche import business
reported that despite an increase in freight costs, they
could not fully raise prices because of falling sales.
Another contact in the restaurant industry reported that


Federal Reserve Bank of St. Louis
reported that the strong demand for tourism is mainly
driven by high-income visitors and a drop in low- and
middle-income visitors.

shortages. Another contact reported that rising interest
rates are stalling commercial real estate sales because
building values have declined at a rapid rate. Little Rock
contacts saw residential construction increase since the
previous report—in part a response to the tornado in
March. Meanwhile, contacts in western Tennessee reported a slowing pace of residential construction.

Manufacturing activity growth has decreased slightly
since our previous report. Firms in both Arkansas and
Missouri have reported slight decreases in new orders
and production, but moderate increases in inventories.
Lingering supply-chain issues and elevated prices on raw
inputs continue to be an ongoing issue for manufacturers, though they have continued to improve in recent
months. Firms are struggling to entice new workers, in
part because of the increased availability of remote work
in other industries. On average, firms reported they
expect slight decreases in production, capacity utilization, and new orders in the coming quarter.

Banking and Finance
Banking conditions in the District have remained stable
since our previous report. Overall and credit card loan
demand decreased slightly from the previous quarter,
while commercial, industrial, and mortgage loan demand
all decreased moderately. Contacts across the District
reported tightening liquidity and profit margins due to the
ongoing pressure to raise deposit rates. Delinquency
rates continued to climb to pre-pandemic levels and are
being closely monitored by banking contacts. One contact pointed to rising cost of living as a potential driver of
the increase in consumer delinquencies. Overall, however, banks continue to report solid credit standards and
quality, with little past-due loans, collections, foreclosures, or charge-offs.

Nonfinancial Services
Reports of activity in the nonfinancial services sector
since our previous report were mixed. Freight traffic
increased slightly month-over-month but was slightly
depressed from last year, while passenger traffic has
been increasing slightly both month-over-month and year
-over-year. A Little Rock transportation contact reported
high demand for air travel. A contact in the Memphis
transportation industry reported issues with shipping and
rising concerns about an upcoming recession due to
growing warehouse inventories. Overall, sales and sales
expectations for services contacts were generally about
the same or slightly lower across all regions. An education provider reported low school enrollment. A St. Louis
childcare provider reported that sales met expectations,
but higher costs contributed to a worsening outlook. A St.
Louis healthcare provider is planning to expand facili-ties
with a new medical office building.

Agriculture and Natural Resources
District agricultural conditions have been mixed since our
previous report. Despite record-breaking heat and heatdome-induced thunderstorms across the District, the
percent of cotton and rice rated fair or better stayed
stable throughout the reporting period, with cotton returning to 2021 rating levels after a moderate dip in 2022.
Corn and soybean ratings both decreased more significantly during the summer months, sustaining their fall
below 2020-2021 levels the previous year. District contacts described feeling the effects of extreme weather
and increased interest rates in the form of higher input
costs. On net, contacts indicated a slight decline in dollar
value sales and an increase in inventories. ■

Real Estate and Construction
Residential rental rates in the four main District MSAs
have remained unchanged since our previous report.
Arkansas and St. Louis contacts both reported high
demand for rental units, with multiple applications submitted in the first week on the market. Total existing
homes sold month-over-month dropped by 11% and 9%
in Little Rock and Memphis MSAs, respectively, during
July. Residential inventory in Little Rock, Louisville, and
Memphis remained relatively constant since our previous
report. Demand continues to be consistent since our
previous report.
Industrial and commercial construction have remained
strong since our previous report. One Louisville contact
reported turning down multiple projects because of labor


Federal Reserve Bank of

The Beige Book ■ August 2023

Summary of Economic Activity
The Ninth District economy grew slightly since early July. Employment increased slightly and wage pressures were
unchanged. Prices increased moderately overall. Growth was noted in consumer spending, tourism, and residential
construction, while commercial construction was flat. Manufacturing as well as residential and commercial real estate
activity decreased, and agriculture weakened. Oil and gas drilling also fell slightly. Minority- and women-owned businesses reported mixed activity.

Labor Markets


Employment grew slightly since the last report. Hiring
demand fell but remained at healthy levels. Most
employers, even small ones, were hiring in some
capacity. But the share of employers looking to add fulltime workers dropped, and total job openings were
moderately lower; very few firms reported that they were
cutting workers. A South Dakota utilities company noted
that it “was hiring positions deemed critical to day-to-day
business operations. All other discretionary positions are
on hold.” Labor supply was improving, but applicant
quality was still poor, with some exceptions in higher-skill
areas. A Montana staffing contact noted that clients were
asking for fewer workers, in part because “they know we
don’t have 10 [good] candidates. They are doing more
with less labor, and forgoing growth.” Larger employers
reported having more success in adding workers, likely
because they also reported stronger increases in

Prices increased moderately overall since the previous
report. A third of firms responding to a monthly business
survey reported that the prices they charged to
customers increased in July from a month earlier, while
40 percent reported that their input prices increased.
More than two-thirds of respondents to a recent survey
said that it had gotten harder to pass their increased
input costs on to customers since the beginning of the
year. A regional manufacturing survey indicated nearly
flat wholesale prices in July from a month earlier. A third
of hospitality survey respondents reported that their
prices charged to customers increased by 5 percent or
more over the past year; contacts in the industry
reported significant continued pressure on food prices.
Retail fuel prices in District states increased briskly since
the last report. Prices received by farmers increased in
June from a year earlier for barley, chickpeas, potatoes,
hay, and cattle; prices decreased from a year earlier for
corn, wheat, soybeans, milk, hogs, turkeys, chickens,
eggs, dry edible beans, lentils, and canola.

Wage pressures were flat but ongoing wage growth
remained above average. A recent survey found that 60
percent of employers raised wages by 3 percent or more
over the last 12 months, roughly in line with wage
increases reported in January. However, respondents
expected future wage growth to fall moderately. A
northern Minnesota workforce contact said, “Wage offers
have stabilized in the last three to six months. Many
have stopped additional wage increases as it does not
seem to be effective in getting and retaining employees.”

Worker Experience
Workers and job seekers continued to prioritize flexibility
and work-life balance, according to several contacts. A
labor contact in the Upper Peninsula of Michigan shared
that many police officers and nurses were choosing
predictable schedules over the highest wages available
when changing jobs. “They prefer balance and flexibility


Federal Reserve Bank of Minneapolis
in their lives,” the contact said. According to a Minnesota
contact, nearly half of clients at a coworking space chose
to work there rather than at the company office or at
home “because they prefer the flexibility and autonomy.”
According to a Minnesota labor contact, financial
incentives offered by employers were having diminishing
effects as they tried to attract new workers.

industrial vacancy ticked higher but remained at healthy
levels. Residential real estate remained soft, with yearover-year July sales falling in most markets, often by
double digits. Several contacts said demand was higher
than indicated by sales and attributed much of the
slowness to very low inventories of homes for sale.

Consumer Spending

District manufacturing activity decreased modestly since
the previous report. A regional manufacturing index
indicated a contraction in activity in Minnesota, North
Dakota, and South Dakota in July from a month earlier.
Manufacturers that responded to the monthly business
conditions survey indicated increased orders in July from
the month prior and were expecting growing sales in the
month ahead. An electrical equipment producer reported
that new business slowed and it was uncertain about its
outlook after working through existing backlogs, a
sentiment reported by multiple other contacts.


Consumer spending was slightly higher overall since the
last report, with some variability. Retail contacts across
the District reported that recent sales were a bit slower
overall compared with the same period last year, and
they expected the trend to continue over the coming
quarter. Hotel bookings in Montana in July were higher
than a year ago, but some tourism contacts there
suggested that the pandemic boom in outdoor tourism
was slowing. Minnesota hospitality and tourism contacts
reported that recent sales were up slightly overall, and
tourism traffic in Michigan’s Upper Peninsula has also
been strong compared with last summer. Passenger
traffic at regional airports saw continued growth. Newvehicle sales have risen thanks to increased vehicle
inventory. A dealership with multiple locations saw newvehicle sales in July rise by almost half compared with
last year; used-vehicle sales have slowed somewhat as
a result. Recent recreational vehicle sales remained
slower across the District compared with last year, but
sales of powersport vehicles have rebounded.

Agriculture, Energy, and Natural Resources
District agricultural conditions weakened slightly. More
than a third of respondents to a survey of agricultural
credit conditions reported that farm incomes decreased
in the second quarter from a year earlier. Several
contacts noted that while commodity prices were still
favorable, they were retreating to levels that could be
below break-even for some producers given high input
costs. Drought conditions improved recently but
remained a concern, especially in eastern portions of the
region. District oil and gas drilling activity decreased
slightly since the previous report; however, contacts
reported that oil production increased recently.

Construction and Real Estate
Construction activity was flat since the last report.
Construction contacts across the District reported mixed
sales activity, with notable shares seeing either
increases or decreases compared with last summer. In
some cases, decreases stemmed from lack of labor.
Industry data showed that the value of construction
starts in the District in July was similar to the previous
two years, without factoring in inflation. Among subsectors, office construction remained moribund, and
multifamily construction was also experiencing softer
activity. Firms serving infrastructure markets reported
stronger activity, likely due to increased federal
spending. Single-family residential construction saw
modest improvements in a few markets; Minneapolis-St.
Paul saw a 10 percent increase in single-family permits
in July year over year. Across the District, hiring
remained robust, supply chains improved, and prices for
materials were easing but still high.

Minority- and Women-Owned Business Enterprises
Activity among minority- and women-owned business
contacts was mixed. Equal shares of respondents to a
July survey of businesses reported that sales were
higher, lower, or unchanged over the prior month.
Capital expenditures were slightly higher on balance,
and more often than not, respondents reported lower
profits. More than a third of respondents shared that their
demand for workers had increased but hiring roadblocks
continued. Retail and wholesale prices were flat for three
-quarters of firms and higher for the rest. A slightly higher
share reported they raised wages. “[We] gave annual
raises of 4.5 percent to stay competitive … up from our
historic 3 percent,” shared a contact with a freight
railroad transportation company in Minnesota. ■

Commercial real estate activity was lower. Multifamily
vacancy rates increased modestly in some markets
despite a slowdown in new construction. Office vacancy
rates have stabilized somewhat, but at high levels;

For more information about District economic conditions


Federal Reserve Bank of

Kansas City
The Beige Book ■ August 2023

Summary of Economic Activity
Economic activity across the Tenth District was stable over the past two months. After falling from high rates of growth
during the first half of the year, manufacturing production and sales at service businesses stabilized in July and August.
Contacts indicated the recent pickup in growth was not due to increases in demand, so much as a greater ability to meet
existing orders as delays along supply chains were resolved. Accordingly, job growth was flat across the District. Despite
several months of subdued employment growth, wages continued to grow at a robust pace through August, exceeding
historical norms and most businesses’ expectations. Consumer spending continued to expand at a moderate pace, with
robust leisure travel offset somewhat by tepid retail sales growth. Several contacts suggested consumers have exhausted
their savings and are relying more on borrowing to support spending. Bankers noted pockets of deterioration in some
consumer loan types as delinquencies rose, with further deterioration expected for consumer borrowers. Prices increased
at a moderate pace in recent months, a noticeable reduction from the pace of price increases witnessed over the last
year. Though slower, growth in input prices still outpaced selling prices for most firms, compressing profit margins.

Labor Markets


Most Tenth District contacts reported employment levels
were unchanged in recent months. Labor markets remained tight with many businesses reporting ongoing
difficulties hiring and retaining skilled workers, partially
contributing to the slowdown in hiring activity. Both services and manufacturing businesses indicated modest
improvements in expected employment growth over the
next six months. These expectations were based on a
better outlook for recruiting workers, rather than a desire
to open more positions and recruit more workers.

Prices increased at a moderate pace in recent months, a
noticeable reduction from the pace of price increases
witnessed over the last year. Though slower, the pace of
growth in input prices still outpaced selling prices for
most firms, which contacts attributed more to elevated
wage growth rather than to rising materials prices. Both
manufacturing and service contacts reported compression in their profit margins in recent months, as businesses were unable to pass all their higher costs onto
customers. Expectations are for continued margin compression in the coming year, but at a slower pace than
witnessed in recent months.

Despite several months of subdued employment growth,
wages grew at a robust pace, exceeding historical
norms. Most contacts reported annual wage increases
between 6 and 10 percent during the first half of the
year. However, these contacts also suggested the
“second half of the year will be different,” renewing their
expectations for softening of wage growth they reported
in early 2023. Most contacts indicated they expect more
moderate wage increases of less than 5 percent over the
next year. Manufacturing contacts, in particular, reported
a stark shift in wage expectations, with over two thirds of
respondents downshifting their expectations to more
modest wage increases.

Consumer Spending
Consumer spending continued to expand at a moderate
pace during the last couple months, driven largely by a
stronger-than-expected summer tourist season. Contacts
across District states reported robust growth in leisure
travel at both drive-to and fly-to destinations. Despite
healthy tourism activity, contacts reported growth in retail
sales has not been as robust. In several states, retail
spending declined slightly, with contacts suggesting
consumers have exhausted their savings and are relying
more on borrowing to support spending. New auto sales
increased a bit due to slightly more available inventory.


Federal Reserve Bank of Kansas City
Community Conditions

Community and Regional Banking

Housing providers faced more difficulty building new,
and maintaining existing, affordable rental properties
because of substantial increases in financing and insurance costs. In Colorado, property insurance premiums
reportedly rose as much as 30-50% over the last year,
due in part to increased weather-related claims. Contacts reported some optimism in being able to help lowand moderate-income households with homeownership,
using state and philanthropic funds for down payment
assistance and rate buy downs. However, evictions and
foreclosures continued to rise, and recently reached or
exceeded 2019 levels across District states. A non-profit
in Kansas City noted calls for housing and utility assistance were up 21% and 12%, respectively, over the
previous six months and up 30% from 2019 levels.

Loan demand weakened further during the last month as
bankers stated high interest rates and economic uncertainty resulted in a cautious approach for prospective
borrowers. Contacts noted pockets of deterioration in
some consumer loan types as delinquencies rose, with
further deterioration expected for consumer borrowers
and across the commercial real estate (CRE) industry.
Several contacts also stated that credit standards for
CRE loans had tightened in light of reduced risk appetite
and expected deterioration in credit quality. Deposit
levels stabilized during the last couple of months, while
the funding mix continued to shift from checking accounts to time deposits, driving up overall bank funding

Manufacturing and Other Business Activity

Tenth District energy activity remained steady through
August. Though oil prices rose, total oil production and
rig counts in the District were essentially flat, as global oil
consumption slightly underperformed a majority of District firms’ expectations. The number of active gas rigs
decreased slightly, and production stagnated because
drilling for gas remained unprofitable for District firms.
Well completions leveled off from recent declines, keeping the number of drilled-but-uncompleted wells unchanged. Accordingly, District energy employment ticked
up only slightly, but still lagged pre-pandemic levels.
Coal production in Wyoming increased moderately as
regional prices remained above historic levels.


After declining for several months, manufacturing production and sales at service businesses stabilized in July
and August. Contacts indicated the recent pickup in
activity was not due to increases in demand. Instead,
businesses reported a greater ability to meet existing
orders, as delays along supply chains were resolved. As
existing orders were met, businesses indicated that
backlogs and inventory levels declined significantly over
the past two months. Contacts expressed mixed views
on investments plans. Falling profit margins and shorter
backlogs led many businesses to pull back on capital
expenditures. Some contacts also noted securing financing for equipment and transportation vehicles was more
difficult. Still, many businesses reported increasing investment activity in recent months and had plans to raise
their investment spending over the next six months.

The farm economy in the Tenth District remained strong,
but conditions softened alongside lower agricultural
commodity prices and persistent drought. Volatility in
markets for major crops was elevated amid heightened
uncertainty about supply and demand conditions.
Through mid-August, prices for corn and wheat were
about 10% lower than the beginning of the month and
soybean prices also dropped slightly. In the livestock
sector, cattle prices remained strong and continued to
support profit opportunities, despite considerable cost
pressures. Large areas of the region continued to be
heavily impacted by drought that could reduce crop
revenues and limit availability of feed for livestock operations. District contacts continued to highlight input costs,
interest rates and thinner margins as other key concerns.
Lenders indicated that credit conditions remained sound
with support from strong farm finances. ■

Real Estate and Construction
Demand for housing continued to exceed available housing supply across the District. Contacts noted several
changes in the composition of home buyers in recent
months. First, fewer institutional investors bought homes
recently. Investor-buyers were more likely to own a small
number of properties. Second, fewer buyers were willing
to purchase homes that required significant improvements. Financing for home renovation typically requires
licensed contractors perform the work, rather than owners’ “sweat equity.” The combination of skilled-labor
shortages and higher financing costs reportedly deterred
renovation activity on newly purchased homes. Third,
investor-buyers were much more likely to ‘flip’ refurbished homes, rather than hold and rent them, due to
higher interest expenses.


For more information about District economic conditions visit:

Federal Reserve Bank of


The Beige Book ■ August 2023

Summary of Economic Activity
The Eleventh District economy continued to expand at a modest pace overall. Solid growth was seen in the nonfinancial
services sector, while retail sales were flat and activity in the manufacturing, energy, and financial services sectors
declined. Housing demand was mixed, and home price increases remained subdued. Scant rainfall and very high temperatures depressed agricultural conditions in much of the district. Employment growth picked up slightly overall, and
wage growth remained high. Input cost and selling price pressures were elevated in the service sector but modest in
manufacturing. Outlooks were fairly stable, though uncertainty persists around the continuing impact from higher interest

has become more difficult over the past three months to
pass cost increases on to customers. The survey also
showed that Texas businesses expect input costs to
increase 4.7 percent on average this year, down from
9.6 percent increase in 2022. They expect to raise their
selling prices 3.3 percent, down from 7.4 percent last

Labor Markets
Employment growth picked up slightly over the reporting
period. Manufacturing hiring resumed an average pace
after slowing in June, and service sector firms added to
payrolls at a slightly elevated rate. Airlines reported a
normalization after record hiring last year, and some
layoffs were reported in cargo transportation. Overall,
most Texas businesses said they were looking to hire,
and while lack of applicants remained the top impediment, applicant availability generally improved over the
reporting period. However, reports of labor shortages
continued in health care, trucking, oilfield services, auto
repair and skilled trades.

Texas manufacturing activity continued to contract over
the reporting period, with declines seen in new orders,
output, and capital spending. The weakness was broadbased but most notable in chemical, high-tech, and
machinery manufacturing. Food and fabricated metals
manufacturing exhibited more strength than other segments. A chemical manufacturer said construction, packaging, and industrial demand were proving anemic, and
that the weak outlook for China and Europe was weighing on expected export demand. Other contacts cited
higher interest rates as a headwind for capital investments and construction-related manufacturing. An August Dallas Fed survey showed that thirty percent of
manufacturers saw a decrease in production as a result
of the recent heat wave, largely stemming from lower
labor productivity and temperature-sensitive worksites.
Overall, outlooks worsened, and contacts voiced concern over the current manufacturing slump.

Wage pressures remained elevated, though there were
some signs of moderation as the year progressed. Staffing services firms reported less pressure on wages over
the past six weeks.

Price pressures remained subdued in manufacturing but
still elevated in the service sector. Oilfield services firms
noted some input price softening as supply chains improved. Fuel prices were up over the reporting period.
Several contacts remarked that customers were more
price sensitive, and an August Dallas Fed survey of
more than 300 Texas business executives showed that it


Federal Reserve Bank of Dallas
Retail Sales

most expecting a decrease in loan demand and a deterioration of general business activity over the next six

Retail sales stabilized over the past six weeks after
declining in the prior period. Auto dealers noted some
weakness in sales, and contacts pointed to inflation and
high interest rates denting consumer demand. Several
also cited a potential auto workers strike as a threat.
Numerous retailers said sales have been impacted by
the excessive heat hurting demand, particularly stores
that rely on foot traffic. Outlooks stabilized somewhat,
though were still tilted toward the negative.

Drilling activity for oil and gas wells declined over the
past six weeks, particularly for smaller producers. The
Eleventh District rig count fell moderately again, with
past increases in costs and declines in prices for crude
oil and natural gas making some projects uneconomical.
Well completions eased but continued to hold up better
than drilling activity. Most contacts expect the rig count
to stabilize soon, and some expressed receding recession risks.

Nonfinancial Services
Growth in service sector activity accelerated over the
reporting period. Revenue growth was led by professional and business services, where contacts noted improved sentiment about economic conditions. Leisure
and hospitality also experienced a pickup in August
despite several contacts noting a negative impact from
the extreme heat. Airlines said demand stayed strong
over the summer, especially for leisure travel. Health
care remained a weak spot. Overall, outlooks were fairly
stable, with contacts expecting moderate growth over the
next six months.

A significant portion of the district entered (or reentered)
drought over the past six weeks due to meager rainfall
and soaring temperatures. Pasture conditions deteriorated, and the weather had an adverse effect on row crops.
A majority of the Texas cotton crop was rated in poor to
very poor condition, and abandonment is expected to be
high this year. Cattle prices rose further over the reporting period, driven by tight supply and solid demand for

Construction and Real Estate
Housing demand remained solid for new homes due to
incentives such as rate buydowns that help lower mortgage rates. In contrast, existing home sales declined due
to high mortgage rates and low inventories of homes
available for sale. Home price increases remained subdued. Construction for new homes increased, while
multifamily construction trended down. A wave of new
apartment units has caused rents to fall and vacancy
rates to increase.

Community Perspectives
The scarcity of affordable housing remained the most
pressing issue for lower-income individuals, according to
community nonprofits. High rent and costly utilities were
pricing residents out of their current living situation.
Contacts lamented that high construction costs pose a
major challenge for affordable housing developers building more stock. One nonprofit serving senior adults said
inflation coupled with a reduction in SNAP benefits has
put food insecurity as the top threat to seniors, which is a
change from the usual top threats of isolation and difficulty accessing healthcare. ■

The office market continues to face sluggish rents and
high vacancy rates. The outlook is brighter for new Class
A office buildings than older office buildings and other
categories which face a more uncertain future. The retail
market is doing well, though it is expected to slow as
consumer spending weakens. The industrial market
remains solid.

Financial Services
Loan demand declined for the eighth period in a row —
now a full year —though the rate of decline eased somewhat. The pace of decline in overall loan volume also
decelerated, but residential real estate loan volume
declined sharply after stabilizing in May and June. Loan
nonperformance continued to increase, particularly for
consumer loans. Loan pricing pushed up further. Credit
standards continued to tighten, though the share of
bankers reporting a tightening fell to its lowest level since
February. Bankers’ outlooks remained pessimistic, with

For more information about District economic conditions visit:


Federal Reserve Bank of

San Francisco
The Beige Book ■ August 2023

Summary of Economic Activity
Economic activity in the Twelfth District strengthened slightly during the July through mid-August reporting period. Hiring
activity was generally stable and labor availability improved. Price increases persisted, albeit at a slower pace, and
wage pressures softened further. Retail sales increased slightly, on balance, but activity in the service sectors was
somewhat mixed. Demand for manufacturing goods was stable, and conditions in agriculture and resource-related
sectors remained largely unchanged. Residential real estate activity was flat while that of commercial real estate was
mixed. Lending activity moderated in recent weeks. Communities across the Twelfth District observed increased demand for shelters and food bank services, particularly in areas impacted by adverse effects of wildfires and other severe
weather events in Hawaii and California. Contacts generally expressed a slightly more positive outlook for the economy
relative to the previous reporting period.

Reports mentioned continued wage growth in recent
weeks but at a slower pace than previously observed.
However, some firms in agriculture, hospitality, community services, and gaming continued to face upward
wage pressures ranging from moderate to strong in
some regions. Several employers mentioned focusing
their wage increases on entry-level jobs, partially due to
new local minimum wage regulation.

Labor Markets
Hiring activity was generally stable during the reporting
period, and labor availability improved further. Many
employers mentioned holding their head counts flat in
recent weeks, and some firms reported being overstaffed. Contacts highlighted expanded candidate pools
and greater ease in finding applicants with appropriate
skill sets. Hiring activity in the technology sector remained subdued aside from positions focusing on artificial intelligence. Contacts in the agriculture and healthcare sectors noted their continued investment in automation, reducing their demand for workers on net. Nonetheless, hiring challenges persisted for specific positions
within many sectors, including aviation, retail trade, and
food services. Employee turnover generally decelerated
but remained high in a few industries, including hospitality and nonprofit community services. One employer in
manufacturing mentioned additional interest in transitioning interns into full-time positions. In entertainment,
hiring has reportedly halted while contract negotiations
continued over disputes between the studios and the
industry’s labor unions. Looking ahead, many employers
mentioned plans to hire only on a replacement basis or
implement possible cutbacks over the remainder of the

Prices increased at a slower pace for most products and
services. Reports noted generally stable prices for many
supplies, including most building materials, paper products, chemicals, and foods and beverages. However,
strong price pressures persisted for other product and
service categories, including utilities, insurance, used
vehicles, packaging, and some construction materials
such as cement and gypsum. One contact attributed
continued price pressures to firms maintaining aboveaverage levels of inventory due to global economic uncertainty.

Community Conditions
Housing affordability, homelessness, and food insecurity
continued to challenge communities across the District.
Temporary housing shelters and food banks saw increased demand in recent weeks, especially from older

Wage pressures softened further across most sectors.


Federal Reserve Bank of San Francisco
adults. In particular, demand for services was highest in
areas impacted by wildfires and other severe weather
events in Hawaii and California. Nonprofit organizations
reported challenges meeting the demand for behavioral
health and substance misuse services. Several contacts
highlighted ongoing consolidation among nonprofit organizations due to chronic labor and funding issues.

particularly for fruits and vegetables. A contact from
Arizona reported challenges with limited availability of
produce for retail outlets. Exports of some products,
such as grain and hay, reportedly fell, resulting in increased domestic supply levels and lower domestic
prices. Major fish stocks were stable. Though yields for
some crops remained low due to the wet winter, contacts
reported high volumes of crops carried over from the
prior harvest and strong projections for this year’s perennial crop yields in California and Washington. Production
input costs remained elevated with upward movement
for some costs, such as packaging and energy.

Retail Trade and Services
Retail sales rose slightly in recent weeks, on balance.
Retailers reported ongoing strength in consumer spending in most areas even though shoppers continued to
trade down to lower cost items and reduce their spending on nonessential goods. Demand for food and beverages remained largely unchanged, while sales of pet
care products slowed somewhat. A few retailers noted
lingering challenges from the pandemic, as well as tighter access to affordable credit. Reports highlighted continued improvements in supply chains but noted that
inventory growth ticked down.

Real Estate and Construction
Activity in residential real estate was flat over the reporting period. Demand for single-family homes remained
strong. Contacts across the District reported that homes
continued to receive multiple bids from prospective buyers. Inventories of existing single-family homes remained
low as owners were reluctant to relinquish lower-rate
mortgages. Multifamily rents reportedly increased but at
a moderating pace. Some contacts observed that new
residential construction activity rebounded somewhat in
past weeks, while others noted declines in permitting
and difficulty finding lots. Raw materials were reportedly
more readily available.

Activity in the consumer and business services sectors
was somewhat mixed. Demand for business consulting
edged down, while demand for legal and accounting
services was robust. Hospitality and tourism activity
remained solid despite increased competition from foreign destinations for leisure travelers. Demand for health
-care services and maintenance work reportedly increased.

Commercial real estate activity was mixed in recent
weeks. Weakness in the office leasing sector continued,
and vacancy rates remained elevated. However, a contact in Utah reported stable demand for retail and industrial space, higher retail rents, and overall lower vacancy
rates. Commercial construction activity weakened slightly. Work on existing projects continued due to lengthy
construction timelines, but plans for new projects were
delayed or abandoned. Some inputs, such as electrical
components and appliances, became harder to find.

Manufacturing activity was stable over the reporting
period, on net. While many manufacturers, including
automotive, commented on overall weakening demand,
orders for some manufactured products grew further.
Food manufacturing continued to operate at or near
capacity, and demand for capital equipment and fabricated metal products remained strong. However, some
customers temporarily delayed projects due to overall
economic uncertainty and concerns over an economic
downturn. Supply chain disruptions eased further, and
some manufacturers reported normalizing inventory
levels. Delivery times for supply materials continued to
improve, but availability of semiconductors remained

Financial Institutions
Lending activity moderated in recent weeks. Demand for
business loans, particularly commercial real estate
loans, weakened some as higher financing costs led
firms to further delay or cancel projects. Residential
lending remained subdued due to high mortgage rates
and limited inventories. Consumer lending, particularly
for credit cards, was reportedly solid. Some contacts
reported competition for deposits strengthened to an alltime high, as more customers actively sought higher
deposit rates and looked at money market funds as an
alternative. Lending standards tightened further, and
credit quality remained strong. ■

Agriculture and Resource-Related Industries
Conditions in the agriculture and resource-related sectors remained largely unchanged during the reporting
period. Domestic retail and food services demand for
agricultural products was stable, with strength noted